For many people in the UK, homeownership is seen as the ultimate goal. From sacrificing holidays and social lives to moving in with their partner’s parents, people will go to great lengths to save a deposit and buy their own place.
While homeownership is seen as desirable, renting has a bad reputation. Rent is often described as ‘dead money’ and many people question whether there’s any point in paying your landlord’s mortgage when you could be paying your own.
But is buying really better than renting? For people who want flexibility and a lack of commitment, is it not better to rent instead? If you’ve come to a crossroads and you’re wondering ‘should I rent or buy a house’ read on.
I’ve weighed up the pros and cons of renting vs buying.
I’ve asked tenants ‘why is renting better than buying?’
And I’ve asked homeowners why they bought their home and never looked back!
Why is renting better than buying? Renting benefits
1. You’re paying for a roof over your head
Those who look down on renting often act like tenants are throwing their money away each month and getting nothing in return. But renters are getting something for their money – they’re getting a roof over their head. They’re getting a place to live. They’re getting a home without having to sacrifice everything they love to save a deposit!
2. Repairs are not your responsibility
If something breaks in your rented home, it’s rarely your job to fix it. Aside from buying and changing your own lightbulbs, perhaps, it’s your landlord’s job to repair broken boilers, replace damaged furniture and fix mould quickly. You can put your feet up or get on with your life while they worry about getting the job done.
3. You don’t have to pay tax when you move
While homeowners often have to pay Stamp Duty Land Tax (SDLT) when moving house, renters don’t. You can move house as many times as you like without worrying about tax eating away at your savings.
4. Paying rent can be cheaper than paying mortgage payments, bills and maintenance costs
As we explain later in the post, mortgage repayments can be cheaper than rent – especially if you buy a house with a big deposit.
However, if your rent is inclusive of bills and you’re lucky enough to find a landlord who repairs things in a reasonable time frame, you may have struck a better deal than many homeowners. On top of their mortgage payments, they’ll also have to factor bills and maintenance costs into their monthly budgets. Some homeowners (especially those living in flats or leasehold properties) might even have to pay ground rent and maintenance charges to a private management company. As a renter, everything should hopefully be included in one monthly reliable fee!
5. Flexibility to move around a lot and live wherever you want
One of the biggest renting benefits is that it gives you the flexibility to move as often as you please and live wherever you want. You could live in Spain for one month and Canada the next if you wanted to. Homeowners often feel tied to their properties. Sure, they can travel if they want, but while they’re jet-setting around the world their home is still sitting there needing its mortgage to be paid. They could rent their home out but this is rarely a straightforward or stress-free process for those who never intended to be a landlord.
Renting downsides
1. Very little control over your home
It’s frustrating how little control renters tend to have over their homes. Whether you want to decorate your bathroom or put up a gallery wall in your living room, asking permission to make these changes can be really frustrating, especially if your landlord says no. This is one of the biggest downsides of renting and one of the main reasons so many tenants are eager to escape.
2. Little security
If you’ve ever been unfairly evicted from your home, you’ll know how little security tenants have.
Tenants have rights that are designed to protect them from wrongful eviction, but the law isn’t always as effective as it needs to be. Unfortunately, landlords keep landlording, even if the law says their tenant is in the right.
3. You can be paying rent forever
While mortgages have a set term and homeowners will own their home outright one day, the same cannot be said for renters. Those who rent forever will have to pay rent forever. It can be frustrating to feel as though there’s no end in sight.
Why is buying better than renting? Homeownership benefits
Homeownership has also become a symbol of stability and success. For many, there’s something satisfying and affirming about getting the keys to your own place and ‘building a life for yourself’ in one place.
The first few minutes of the movie Up pretty much summarises the homeownership dream. We see Carl and Ellie Fredrickson falling in love, buying a rundown house, and turning it into their dream home. For many people, it’s what they’ve been told to aspire to from a young age.
But what are the advantages of homeownership? Is homeownership more affordable than renting? Let’s start by looking at the perks…
1. Mortgage payments can be lower than rent
According to Halifax’s ‘Buying vs Renting Review’, homeowners are more than £800 a year better off than renters on average. The bank also found that the gap in cost between owning and renting a home has grown by 8% during the pandemic. In some parts of the country, the gap is even wider.
2. You’ll have more control over the property
Having to ask your landlord’s permission to hang a picture or paint a wall SUCKS. If you’ve ever rented a property from a control freak of a landlord, being able to decorate and alter your home to suit your own tastes can be priceless.
3. Once your mortgage is paid off, it’s all yours
Becoming mortgage-free is a goal that many homeowners dream of. With many homeowners having to take out mortgages with terms lasting 30 or 45 years, it can take a long time to get to that stage. When your mortgage is finally paid off, though, you’ll have extra room in your budget for other things because you’ll no longer lose a chunk of your income or savings to repayments each month. Many people who become mortgage-free talk about how it feels like a weight has been lifted from their shoulders.
Homeownership downsides
Buying a house might be portrayed as the ultimate life goal, but it isn’t for everyone.
Saving a deposit, getting a mortgage, and buying your own place is by no means easy. Here are some of the biggest homeownership downsides.
1. Saving a deposit can take years and a lot of sacrifice
Many people have to sacrifice their living conditions, social lives, and work/life balance simply to save a deposit in the first place.
Before making these sacrifices, ask yourself whether homeownership is really what you want.
2. It can be a struggle to get a mortgage
Once they’ve saved enough for that initial down payment, the struggle doesn’t end there. They’ve then got to convince a mortgage lender that they’re a suitable borrower.
To get a mortgage you will usually need:
- Proof of income for 3-6 months if you’re employed/2 years of accounts if you’re self employed
- Proof of 3-6 months’ worth of expenses. Most lenders will want to see your bank statements.
- A good credit rating. Some lenders will give mortgages to those with imperfect ratings, but you might not be able to borrow as much and your mortgage may be more expensive
3. Maintenance costs can be expensive
Homeownership can come with lots of maintenance costs, whether you’ve bought a brand new house or a fixer-upper. I bought a new build in 2017 and while there were very few issues when I first moved in, over time I began to face problems I needed to pay someone to fix. A leaky sink here, a broken washing machine there, it all adds up!
4. You’ll have to arrange repairs yourself
Not only can it be expensive to fix repairs, it can be time-consuming too! You might spend hours hunting down various tradespeople only for them not to turn up. It makes me miss the days I could just call a landlord and have them take care of it for me.
Saying that, if you’ve ever had to put up with a dodgy landlord who ignores your texts and lets dangerous faults go unfixed for months, arranging repairs yourself might sound like a better alternative.
And the longer you’re in your home, the easier it should become to find trustworthy and reliable workers. Over time, you’ll build up a little address book of people you can count on.
5. Can work out far more expensive than renting
When people say ‘why pay off a landlord’s mortgage when you could be paying off your own’ they often fail to consider what percentage of a mortgage payment goes on interest. At the moment, half of my monthly mortgage payment is spent on interest! Doesn’t feel like such a great investment when you think of it like that.
And when you consider the cost of moving house, it’s easy to see how a homeowner’s money can slip away from them.
If you’re a first-time buyer in the UK and you’re buying a home worth less than £300,000, you won’t pay stamp duty on your purchase. If you spend more than £300k, you will. People who are buying their second home will also be taxed. A first-time buyer would pay £5,000 of stamp duty if buying a £400,000 house while a home mover buying the same property would pay a whopping £10,000 on stamp duty. This is money you’ll never get back and can easily eat into your homeownership ‘profits’.
6. You might not have as much control as you think
Earlier in the piece, we talked about how great it is to have control over your own home, but unfortunately, this isn’t the case for every homeowner.
Planning permission
You might need to obtain planning permission before making changes. For example, if you’d like to have a really big extension or build a conservatory.
Leasehold property restrictions
If you buy a leasehold property, for example, you might need to ask permission from the developers or building owner before you change things such as your front door or garden.
I live in a leasehold flat and I’m not allowed to knock down walls, replace the grass with astroturf or even call someone to fix my leaky roof without getting permission!
Is homeownership a better decision financially?
If you’re approaching homeownership from a purely financial standpoint, there are much better ways to make money. Becoming a homeowner doesn’t guarantee financial security and wealth. Renting doesn’t mean you’re destined for a life of struggle. In fact, there are rich people who prefer the flexibility that renting brings! Renting allows them to travel the world freely, without feeling obligated to stay in one place.
Believe it or not, the stock market can offer a much better return than homeownership can. If you really want to invest in property, you can buy property market stocks!
Should I rent or buy a house?
Unfortunately, the ‘should I rent or buy a house’ question has no straightforward answer. What works for one person might not work for another. Some people want stability and to build a life for themselves in one place. Others want flexibility and the freedom to move around a lot.
My brother and his wife rent an apartment in LA and they’re living their best lives! They could pack their bags and move to New York if they wanted to and I find that really inspiring.
Homeownership can be more of a lifestyle decision rather than a financial move, so rather than thinking about which option will make you richer, focus on which will make you happier and which is most affordable for you!